Pharmaceutical services giant Quintiles reported mixed first-quarter results.
The Durham-based company posted strong new business bookings and net income exceeded Wall Street’s expectations by a penny per share, but it also lowered its revenue guidance for the year and its margins disappointed some analysts.
Tim Evans, an analyst at Wells Fargo Securities, said in a research note that this is the first quarter since Quintiles went public two years ago that it hasn’t raised its guidance for earnings per share. Instead it left its earnings guidance unchanged while reducing its revenue guidance for the year to 7 percent to 8 percent, down from 7.5 percent to 9 percent previously. The company’s guidance excludes the results of currency fluctuations.
Quintiles’ guidance, he wrote, “could take some momentum out of the stock.”
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Quintiles shares were trading at $67.63, down $1.68, early Wednesday. Its shares are up 13 percent this year.
CEO Tom Pike was upbeat about the results during a conference call.
“We started the year with a good quarter that generally played out as we expected,” Pike said.
Net revenue for the quarter totaled $1.03 billion, up 2.5 percent. Revenue growth was 8.4 percent after excluding foreign currency fluctuations, as the strong U.S. dollar depressed revenue by $59 million.
Adjusted net income totaled $91.2 million, or 72 cents per share, up 5 percent on a per-share basis. Analysts were expecting 71 cents per share.
New business bookings rose 5.6 percent, or 10.5 percent after adjusting for currency fluctuations. New business is a leading indicator of future revenue.
“Net bookings in the quarter appear to be the highlight, coming in at $1.35 billion. This is $270 million above our target,” William Blair & Co. analyst John Kreger wrote in a research report.
Quintiles, the world’s largest contract research organization, helps drug companies test experimental medicines and analyze the results. It also assists those companies with selling and marketing prescription medicines after they win regulatory approval.
Pike said that Quintiles, which has 33,200 employees worldwide and roughly 2,500 in the Triangle, has been adding workers – and will continue to do so – to handle the influx of new business.
“The challenge in our business, to be candid, is we are a people-based business,” he said. “So when you have that kind of net new business, you have to make sure you have the people to deliver the revenues. You saw that impact in the margins this first quarter and you’ll see it” throughout the rest of the year.
Pike side-stepped a question about future hiring plans but said that “we are laser-focused on trying to add only billable headcount where we need to and (keep non-billable headcount) to a minimum. We think that’s best for shareholders and best for us.”
Quintiles has added about 4,000 workers worldwide over the past 12 months, even though it also reported in February that it was cutting 270 jobs worldwide to lower operating costs and improve profitability.
That has been Quintiles’ pattern in recent years – adding employees overall but also implementing some layoffs as business needs have shifted.